Disney will begin enacting layoffs, implement a targeted hiring freeze and limit corporate travel as part of a radical cost-cutting drive announced to management on Friday.
In the report obtained diversity, Disney CEO Bob Chapek, who was sent to top officials Friday afternoon, wrote: “I fully realize this will be a difficult process for many of you and your teams. We will have to make difficult and uncomfortable decisions. But that is exactly what leadership requires, and I thank you in advance for stepping up your efforts at this important time. Our company has overcome many challenges during our 100-year history, and I have no doubt that we will achieve our goals and create a more nimble company that is better suited to the environment of tomorrow.”
Chapek says Disney will also conduct a “thorough review of the company’s content and marketing spend,” all of which will be overseen by a newly formed “cost structure task force” made up of Chapek, CFO Christina McCarthy and general counsel Horacio Gutierrez.
News of the layoffs and cost-cutting comes four days after Disney reported rough quarterly earnings results that sent the company’s stock to its lowest price in more than two years.
While the company saw subscriptions to Disney+, which launches its ad-supported tier on Dec. 8, well beat Wall Street expectations, Disney reported an operating loss for its streaming segment of $1.47 billion for the quarter ending Oct. 1, 2022, about $800 million . more than in the period a year ago. Revenue rose 8% to $4.9 billion, which the company attributed to higher losses at Disney+ and ESPN+ and lower results at Hulu. Meanwhile, revenue from Disney’s linear TV networks (pay TV and broadcast) fell 5% in the quarter.
Chapek wrote on Friday that these “cost management efforts” that he and McCarthy hinted at in relation to earnings, which “occur against a backdrop of economic uncertainty” affecting all of Hollywood, “will help us achieve the important goal of achieving profitability for Disney+ in fiscal year 2024 and make us an overall more efficient and nimble company.”
Disney representatives did not immediately respond Diversityuser request for comment.
See Chapko’s full note below.
Disney Leaders –
As we begin fiscal 2023, I want to speak directly to you about the cost management efforts that Christine McCarthy and I mentioned on this week’s earnings call. These efforts will help us achieve the important goal of achieving profitability for Disney+ in fiscal year 2024, while making us a more efficient and nimble company overall. This work takes place against a backdrop of economic uncertainty that all companies and our industry are struggling with.
While some macroeconomic factors are beyond our control, meeting these goals requires us to continue to be involved in managing the things we can control – primarily our costs. All of you will have critical roles to play in this effort, and as leaders, I know you can handle it.
To be clear, I am confident in our ability to achieve the goals we have set for ourselves and in this management team to get us there.
To help us on this journey, I have established a cost structure task force composed of executive officers: our CFO Christine McCarthy and General Counsel Horacio Gutierrez. Together with me, this team will make the critical big decisions needed to achieve our goals.
We’re not starting this work from scratch, and we’ve already established some next steps – which I wanted you to hear about directly from me.
First, in collaboration with our content leaders and their teams, we conducted a rigorous review of the company’s content and marketing spend. While we don’t sacrifice the quality or power of our unrivaled synergistic machine, we must ensure that our investments are effective and deliver tangible benefits for both audiences and society.
Second, we are limiting headcount growth through a targeted hiring freeze. Hiring for a small subset of the most critical positions that drive the business will continue, but all other roles are on hold. Your segment leaders and HR teams have more specific details on how this will apply to your teams.
Third, we’re reviewing our SG&A costs and we’ve found that there’s room to improve efficiency—as well as an opportunity to transform the organization to be more nimble. The task force will manage this work in collaboration with segment teams to achieve both savings and organizational improvements. As we work through this evaluation process, we will look at every way we operate and work to find savings, and as part of that review we anticipate some reductions in staff. In the immediate future, business trips should now be limited to essential trips. In-person meetings or off-site work that requires travel requires prior approval and review from a member of your executive team (ie, direct report to the segment president or CEO). If possible, these meetings should be conducted virtually. Attendance at conferences and other external events will also be restricted and will require the approval of a member of your executive team.
Our transformation is designed to help us succeed not just today, but into the future – and you’ll be hearing more from our team in the weeks and months ahead.
I am fully aware that this will be a challenging process for many of you and your teams. We will have to make difficult and uncomfortable decisions. But that is exactly what leadership requires, and I thank you in advance for stepping up your efforts at this important time. Our company has overcome many challenges during our 100-year history, and I have no doubt that we will achieve our goals and create a more nimble company better suited to tomorrow’s environment.
Thank you again for your guidance.